Retailers post mixed November sales

NEW YORK (MarketWatch) -- U.S. retailers posted mixed November sales results, with scarcity of must-have fashion items and no shortage of macroeconomic concerns battering many U.S. apparel retailers, while value-seeking shoppers and a calendar shift aided wholesale clubs and department stores.

Consumers concerned about higher gasoline, food costs and declines in housing and credit markets have curtailed discretionary spending on items such as apparel, analysts said. They sought bargains and consolidated trips to wholesale clubs and discounters and went out for Black Friday door-buster specials on flat panel televisions or laptops. Retailers may need to pull out more stops and be forced to offer profit-hurting promotions to entice budget-pinched shoppers who also increasingly delay their holiday purchases, analysts said.

'Consumers are simply not out there in force.'
Michael Niemira, International Council of Shopping Centers

"Consumers are simply not out there in force," said Michael Niemira, chief economist of the International Council of Shopping Centers. "The wholesale club is doing a lot better simply because the consumer is facing more difficult times and there's been a shift to more value oriented retailers."

An extra holiday shopping week because of a calendar shift lifted demand at department stores and retailers such as Target Corp., which is expected to hurt results in December, analysts said.

Forty-four percent of 43 retailers that reported November sales results beat analysts' estimates, while 51% of them missed, according to Thomson Financial. November sales at stores open at least one year, an industry performance measure that excludes results from closed and new stores, rose 3.5%, better than the original projection of 2.5%, with three quarters to as much as a percentage point of the upside from a shift in calendar, Niemira said. The November reporting period included nine post-Thanksgiving shopping days versus two days last year.

Colder weather also added a small silver lining to sales results, analysts said, after it lifted pent-up demand for sweaters, coats and other seasonal items. Record high unseasonably warm weather had hurt sales in September and October. Based on year to date sales trend, this year is on track to reap the slowest sales growth in at least four years, according to the ICSC. The industry was forecast to have its worst holiday season in five years.

"November was clearly aided by the calendar shift," said Morgan Stanley analyst Michelle Clark. "We expect the department stores to report largely negative results for December. The traffic slowdown following Black Friday is more pronounced this year than last."

While cold-weather apparel, consumables, food and electronics saw strong demand during the month, toys, cosmetics and holiday decorations and home furnishings were weak, said analyst Deborah Weinswig of Citigroup.

Niemira forecast a 2.5% gain in December same-store sales, compared with a 3.3% gain last year, hurt by the calendar shift.

"Combined with a lack of fashion and the macro backdrop, we believe that investors should stay on the sidelines between now and the end of the year," said Weinswig, who covers discounters, department stores, wholesale clubs and dollar stores at Citigroup.

Target's warning

Target posted a 10.8% sales gain because of the calendar shift and would have increased only 1.1% on a calendar adjusted basis.

Shares tumbled 6.3% after the retailer said sales missed the mark after traffic slowed in the last week of November and it saw softness in toys and home and apparel items. The retailer warned that it may miss its fourth-quarter profit growth plan if sales don't "meaningfully improve" in December. The stock was downgraded to market perform from outperform by Wachovia Securities analyst Peter Benedict.

Economic concerns are benefiting retailers with more exposure to consumable items as value-conscious shoppers hold back on discretionary purchases, analysts said. Compared with its rivals, Target has about 32% of sales from non-discretionary items such as food; while Wal-Mart has 40% and Costco about 54%, according to Benedict.

The S&P Retail Index fell 1% in early afternoon trading, led by drops in Family Dollar Stores Inc., J.C. Penney Co. and Target Corp. Family Dollar shares tumbled 8.2% after it missed forecast.

Retailers led by Wal-Mart
WMT, -0.74%
began their holiday promotions earlier this season and stores such as J.C. Penney Co.
JCP, -3.17%
opened their doors in the wee hours on Black Friday to kick off their biggest selling period and to entice shoppers. Traffic that picked up that weekend have since slowed as more and more shoppers delay their buying until later in the season, analysts said.

Wal-Mart Stores
WMT, -0.74%
the world's largest retailer, said sales rose 1.5%, exceeding estimates of a 1.2% increase. Wal-Mart chain sales rose 1%, missing estimates of a 1.2% gain. Sam's Club sales climbed 4.3%, exceeding forecast of a 3% gain. While home category remained soft, apparel sales improved after colder weather led to purchases of coats and other outerwear.

The discount retailer began the month with Black Friday specials three weeks earlier after it said it would be aggressive with prices to lure customers hurt by higher gasoline, increasing food prices and a decline in housing and credit markets. Wal-Mart forecast December sales of up 1% to 3%.

Costco sales rose 9%, exceeding estimates of a 6.6% gain, boosted by higher sales of gas and lower dollar that drove international gain.

Calendar shift boost

Department stores including Kohl's Corp.
KSS, -2.57%
Macy's Inc.
M, -1.76%
and Nordstrom Inc.
JWN, -1.56%
also reported November same-store sales on an unadjusted basis, boosting sales results, said Ken Perkins of research firm Retail Metrics. Macy's sales surged 13%; Kohl's jumped 10.2% while Nordstrom up 8.7%, all exceeding estimates. J.C. Penney sales rose 2.6%, missing Wall Street expectations, as it continued to experience soft home goods sales. J.C. Penney said the calendar shift that had benefited results in November will lead to a mid-single-digit drop in December sales.

"We continue to plan our business conservatively," said J.C. Penney spokesman Phil Sanchez on a recorded call. "There are a number of important selling weeks ahead of us, including a full weekend before Christmas which may also play into a later peak."

Luxury sector continued to be one bright spot, with Saks Inc. sales surging 26%, more than double analysts' expectations of a 12% gain.

"It appears that the customers came to the stores early in the month and then later for a deal on Black Friday weekend, but was not shopping otherwise," said Credit Suisse analyst Paul Lejuez. "Decelerating trends throughout the month may cause fears that December started off weak (and the thought that retailers will have to discount heavily to clear through merchandise)."

Abercrombie & Fitch Co.
ANF, -2.16%
led the teen retail sector, with sales up 2%, exceeding analysts' estimates. Gap Inc.
GPS, -2.34%
the largest U.S. clothing chain, posted flat same-store sales, beating analysts' view for a 4.8% drop, helped by the Crazy Stripes theme at its namesake location and promotions at Old Navy. The company said merchandise margins were up "significantly." Shares of Gap rose 4%.

"We are encouraged by the company's expense cutting initiatives as well as new CEO Glenn Murphy's focus on speed to market and return on capital." Lejuez said in a report.

Intraday Data provided by SIX Financial Information and subject to terms of use.
Historical and current end-of-day data provided by SIX Financial Information. Intraday data
delayed per exchange requirements. S&P/Dow Jones Indices (SM) from Dow Jones & Company, Inc.
All quotes are in local exchange time. Real time last sale data provided by NASDAQ. More
information on NASDAQ traded symbols and their current financial status. Intraday
data delayed 15 minutes for Nasdaq, and 20 minutes for other exchanges. S&P/Dow Jones Indices (SM)
from Dow Jones & Company, Inc. SEHK intraday data is provided by SIX Financial Information and is
at least 60-minutes delayed. All quotes are in local exchange time.